Our Ventura Bankruptcy Attorneys Can Help You Find Relief Through Debt Settlement
Bankruptcy is not for everyone. If you are struggling with debt, bankruptcy may not be your only option, and it may not be the best option. At Rounds & Sutter, we take the time to understand your unique situation and advise you on the best courses of action open to you. We do not try to push you into one option or another, but give you the facts and information you need to make an informed decision regarding what is right for you. Debt settlement is an alternative to bankruptcy that may be enough to get you the relief from debt you need.
How Debt Settlement Works
A debt settlement involves negotiating directly with the creditors to get them to accept a lesser amount than what is owed in total on the debt. Sophisticated lenders and other creditors understand that if you cannot pay your bills, you may wind up in bankruptcy, in which case the creditors are likely to get nothing. Given that prospect, many creditors are willing to negotiate a debt settlement for significantly less than the total amount of the debt.
It is important to retain the services of an experienced, successful bankruptcy attorney to negotiate on your behalf. While unrepresented persons may get some form of settlement, it is usually far less than what a skilled negotiator can achieve. A knowledgeable lawyer will also make sure important aspects of the debt settlement are taken care of, such as having the debt marked as paid in full on your credit report, which is critical to maintaining your overall financial health.
When Bankruptcy is Better
While debt settlement can offer real debt relief, it is important to understand its limitations and drawbacks. When you negotiate a debt settlement, you are usually required to pay off the negotiated amount in one lump sum payment. Many people do not have that much cash on hand to pay off a debt all at once; if they did, they probably wouldn’t need to negotiate a debt settlement in the first place. Also, consider that if you owe large amounts to many different places, you will have to negotiate a debt settlement with each company individually, and there is no guarantee that any one of them, let alone all of them, will agree to accept a settlement in lieu of full payment. Debt settlement is preferable if you only have one large debt to deal with, or if negotiating one settlement will free up enough disposable income to allow you to meet your other obligations comfortably.
Another important aspect is the tax consequences of a debt settlement. Any amount of a loan which is forgiven is considered by the IRS to be taxable income, meaning you have to pay taxes on the amount which was discounted from the debt. Debts discharged in bankruptcy, on the other hand, are not treated as taxable income, so there is no tax liability on any amount forgiven in bankruptcy.
Contact Rounds & Sutter to Explore Your Options for Debt Relief
While a debt settlement can reduce the amount you owe by a considerable amount, you can generally get a debt reduced by the same amount or greater in bankruptcy, or even discharged altogether. Whether bankruptcy is better depends on many different factors which should be carefully reviewed with your attorney before deciding which way is best for you in your given circumstances. Contact the bankruptcy and debt settlement attorneys at Rounds & Sutter to explore your options. With offices in Ventura, Santa Barbara, Westlake Village and San Clemente, we serve people throughout Southern California seeking freedom from oppressive debt.